And Now, A Word About the Postal Service and Public Service

As the U.S. Postal Service, like many of its foreign counterparts, attempts to generate profits by being more “businesslike”, it is running up against a long tradition of public service and costs. Public policy makers – in the name of their constituents – value those public services. They just choose to ignore the costs. And few are discussing, in any practical sense, the opportunities for generating profitable revenue through appropriately priced new public services.

The Universal Service Obligation

The Postal Service is a unique mix of public obligations and business requirements. Closing a post office is a federal case, quite unlike closing down hospitals, gas stations, and grocery stores. So is the issue of the number of days of delivery. Other delivery firms set their own standards, based on demand. They impose surcharges or fees for service to some locations, and choose not to deliver at all to some others. The Postal Regulatory Commission has estimated the net cost (after accounting for the “benefits” of being a government organization) of universal service at about $5 billion.

The Postal Service has, in the past, offered services such as limited banking to some consumers not well served by the private sector. Recently, some public officials have suggested that the Postal Service could do so again, but this service is likely to impose additional costs on the Postal Service. There may be appropriate business models where public services can generate profitable revenue.

Supporting Purely Governmental Functions

The Postal Service also supports a variety of purely governmental institutions. It directly pays for its own regulator. What other industry does that? It directly pays for a specialized federal law enforcement organization, and for an independent government auditor. These activities are not business-related, although each of them benefit the mailing industry. The regulator keeps prices down. The Inspection Service protects against fraud, criminal activity and ensures the security of mail. The auditor provides yet another review of the effectiveness and efficiency of postal programs. These are just the most obvious cases, and the direct costs are several hundred million a year. There are ways to offset certain public service costs that do not require the Postal Service to raise rates on customers.

Collaboration with Other Agencies

The Postal Service is expected to collaborate with other government agencies. For example, people register for the draft at post offices. The Postal Service works with some local or state governments on vote-by-mail programs. The USPS has a profitable agreement with the Department of State to provide some passport services. The Postal Service has worked with FEMA, with the Census Bureau, and with the IRS at different times to assist them in their mission. This often goes far beyond simply delivering mail.

The Postal Service is generally aligned with the processes required of other federal agencies, even when not specifically required, simply because it is generally expected to do so in such areas as human resource, facilities, and procurement policies. On the other hand, the Postal Service has been at a disadvantage in providing mail and package services to government agencies since procurement and contract management policies have put the organization in a different category than its competitors.

There are a wide range of possible opportunities for the Postal Service and federal, state and local agencies to collaborate in ways unforeseen in the past through appropriately priced inter-agency agreements.

Neutrality, Familiarity and Trust

There are a number of other “values” that go along with the Postal Services’ public role. It is neutral, as defined by various laws but most importantly by the rules of non-preferential among different customer segments (except those required by Congress, such as reduced rates for certain mailers). Everyone is supposed to be treated fairly and openly. People are generally familiar with the rules and processes of the Postal Service. There is a high level of trust for reliability, security, and privacy. People trust the Postal Service. This is an attribute that has considerable value that has not been effectively monetized through the development of relevant services.

Leveraging The Postal Service’s Unique Presence in Communities

Almost every day an official representative of the government comes down your street and comes to your business and your house (or mailbox). Consider the potential value of a sustained effort, supported by Congress and the Administration, to save public funds and improve service to the citizens by leveraging this unique infrastructure. Other agencies, such as Interior, have built revenue generating businesses around services provided to other agencies. For some agencies, such as GSA and OPM, their whole reason for existence is to provide service for other parts of government. There may be opportunities for profitable new revenue from providing services to federal agencies, and to state and local governments.

Strategic discussion questions

By Kent Smith

Kent Smith is Research Director, Ursa Major Associates / Postal Vision 2020. His 38 year career in the Postal Service included Rate Classification Research, Market Research, and Strategic Planning. Ursa Major Associates / Postal Vision 2020 is dedicated to taking a broader, longer-term perspective on the future of the mailing industry ecosystem. The thoughts expressed in this “Point of View” are his own.

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4 Replies

Once the USPS is unraveled it will never be reconstituted. It is one of the most efficient if not the most efficient federal organization. A serious study should happen around the cost/benefit of the USPS becoming the common last mile government contact for all citizens.

Kent Smith

You are correct. There is no question that federal law is the foundation of this nation’s postal service. That is why we need to spend just a bit more time thinking about the public service role of the USPS and how it will be defined and paid for in the future.